Europe’s top court issues one more ruling on Austria’s gambling monopoly system

The European Court of Justice has ruled that it is up to an Austrian court to determine whether the country’s monopoly system in respect to the provision of gaming services is coherent. The CJEU ruling was issued on September 6, 2018, and was published today in the Official Journal of the European Union.

The CJEU issued its order in response to a request for a preliminary ruling from the Landesverwaltungsgericht Oberösterreich. The latter is the referring court in a case dating back from 2012 when Robert Pfleger and other applicants turned to court, asking whether the country’s restrictive gambling regime was in breach of Article 56 of the Treaty on the Functioning of the European Union. Said article prohibits member states from hampering the free movement of services within the union.

The legal dispute was initiated after the affected parties had their gambling machines seized by Austrian authorities. According to country officials, the machines, which were found to have been manufactured in the Czech Republic, were operated in Austrian inns and gas stations without the necessary authorization.

The case eventually reached the European Court of Justice. The supreme court of the European Union ruled in 2014 that Austria’s gambling regulatory framework was too restrictive and did not “pursue the objective of protective gamblers or fighting crimes.”

In its order from earlier this year, the court said that:

It is for the referring court to determine, in the light of the guidance given by the Court of Justice inter alia in the judgment of 30 April 2014, Pfleger and Others (C-390/12, EU:C:2014:281), whether a national statutory monopoly scheme in respect of games of chance, such as that at issue in the main proceedings, is to be regarded as coherent, in the light of Article 56 TFEU et seq., where national judicial proceedings have established that:

+ gambling addiction does not represent a societal problem justifying State intervention;
+ the playing of prohibited games gives rise to police involvement in an administrative context and not to criminal offences;
+ annual State income from games of chance exceeds EUR 500 million, being 0,4 % of the annual budget; and
+ the advertising measures undertaken by licensees also seek principally to entice persons who have not previously played games of chance to do so.

Austria’s Unregulated Market Grows Faster than Regulated Operations

According to Austrian consultancy firm Kreutzer Fischer & Partner, the country’s gambling market generated revenue of nearly €1.7 billion in 2017. Online gambling accounted for the smallest portion of the whole bundle with total revenue of €283 million. However, it was the fastest growing sector as it recorded an 11% increase year-on-year.

There is only one operator to be locally licensed to provide online gambling services in Austria – Casinos Austria’s Win2Day brand. However, Kreutzer Fischer & Partner analysts found that unregulated gambling websites actually accounted for 65% of the country’s online gambling market in 2017.

Austria has been heavily criticizes for its current gambling regulatory regime, but instead of liberalizing its market, it has even tried to toughen the existing regulations. Last year, lawmakers were planning to introduce a legislation that would have required local Internet service providers to block unlicensed gambling businesses from targeting Austrian gamblers. A draft bill was introduced this past February, but was later on withdrawn due to technical issues.

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